Tag: Lending Finance

Business Lending Crunched – Investment Lending Apart

The final set of ABS data on finance for July 2016 includes all forms of lending, and does not tell a good story. Whilst investment housing lending grew, lending for productive business growth fell, again.

Here is the summary, having separated business lending for housing investment purposes, versus the rest. As normal we will focus on the trend data, which irons out some of the noise in the data, to see through to the underlying movements.

Lending for secured construction and purchase of dwellings fell 0.1%, or $20m, month on month, secured alterations rose just a little, personal finance rose 0.1% or $6m and overall commercial lending fell 1.75% or $671m compared with last month, and continues to fall.

Within the business or commercial flows, lending for investment property rose 1.1% or $127m, compared with last month, whilst lending for other commercial purposes fell 2% or $384m. Revolving commercial credit fell 5% down $416m.

So productive lending to business continues to fall, and overall lending is being supported by more investment housing. As a result, the proportion of business lending for investment housing rose again to 31% of commercial lending, whilst lending for other commercial purposes fell again to 48.2% of all commercial lending. These trends need to be reversed if we are to get real productive economic growth to kick in.

abs-fin-jul-2016-allFinally, for completeness, here is the housing data, once again showing the ongoing rise in the proportion of investment housing lending, up 1.1% or $127m on last month, and up from 35.9% to 36.1% of total flows.

abs-fin-jul-2016-housingWe think tighter macroprudential measures are overdue.

Investment Home Lending Is Where It Is At

The data from the ABS of lending finance for May 2016 shows an overall fall of 0.8% in borrowing flow of all types, or $885 million, compared with the previous month. Within this, there was a relative rise in the proportion of new loans for investment housing (16.% of all lending flows), whilst the relative proportion of lending to business, net of investment housing, fell, to 53.8% of all lending in the month, down from a maximum of 61% of all flows in Match 2015.

Trend-Lending-Flows-May-2016This is not a good outcome when lending to business can translate to productive growth, whilst lending for investment housing continues to stoke up home prices and bank balance sheets. No surprise the banks are cutting mortgage rates to try and attract more business, but at the expense of business lending.

The total value of owner occupied housing commitments excluding alterations and additions fell 0.6% in trend terms to $20.5 billion. Investment lending volumes, which are included in the business volumes, were similar to the previous month, showing a relative swing towards investment loans at $11.6 billion.

The trend series for the value of total personal finance commitments rose 0.9%, or $65 million to $7.3 billion. Revolving credit commitments rose 1.8% and fixed lending commitments rose 0.3%. The seasonally adjusted series for the value of total personal finance commitments fell 4.6%. Revolving credit commitments fell 7.8% and fixed lending commitments fell 2.3%. Households are borrowing more on personal credit, including making up the difference on deposits for housing, as lending criteria get tighter.

The trend series for the value of total commercial finance commitments fell 1.2% to $28.4 billion, net of investment housing. Revolving credit commitments and Fixed lending commitments both fell 1.2%. The seasonally adjusted series for the value of total commercial finance commitments fell 4.1%. Fixed lending commitments fell 4.4% and revolving credit commitments fell 3.2%.

The trend series for the value of total lease finance commitments fell 3.9% in May 2016 and the seasonally adjusted series fell 14.2%, following a fall of 0.6% in April 2016 to $517 million.